Does density drive development?

Abstract

There is growing interest among governments and researchers around the world in the contribution of cities to economic development. Several influential international organisations have argued that the spatial concentration of economic activity is necessary for faster economic growth. This paper examines whether the density of population and economic activity influences the rate of local economic growth in South Africa. Municipalities are the basic units of analysis and the time frame is 1996-2010. Contrary to expectations, no statistically significant relationship is found between density and growth across the full range of 237 local municipalities. However, searching hard for a relationship among particular kinds of municipality, some evidence does emerge. The influence of human skills on local growth is also examined and is found to be more robust than density. Several reasons are given for why the relationship between density and growth is generally weak or non-existent.